Sunday, October 14, 2007

I was wondering today what the futures market says about the price of oil. I was surprised by the result. NYMEX is the traditional place to trade ail futures; the price is roughly $74.60 for the next 8 years (I thought 84 months is the trading limit, so I don't know how they get 96 months)

I would personally be quite surprised if oil were selling for less than US $100 a barrel in 2015. That would require either a stunning rise in the relative value of the US dollar, the economic collapse of China and India or Europe, or a technology or social breakthrough capable of reducing world oil demand by about 30% prior to 2025. Either that, or we make amazing oil discoveries that push "peak oil" day beyond my personal life expectancy [1].

Or maybe the futures market is predicting we'll really take global warming seriously, and create one hell of a carbon tax.

So maybe it's possible, but it sure seems unlikely. It seems even more unlikely that we'll remain at $75 US a barrel in five years; all of the "radical impacts" I've listed are particularly unlikely in that time frame.